In a land of cellphone giants, Palm Inc. is a mouse.
Palm is tiny compared with Apple Inc., Research in Motion Ltd, Samsung Electronics Co. Ltd, Google Inc., Microsoft Corp. and Nokia Oyj, which are battling to control the future of smartphones.
Palm invented the category of an Internet-surfing pocket-computer phone with its Treo line in 2002. But more recently it lost its way in the market as some of its rivals developed more innovative phones.
Its new management team, heavily laden with talent from Apple, introduced a new generation of smartphones in June with the $199 Palm Pre (Rs9,174) on Sprint’s network. The second phone in the line, the $99 Pixi, went on sale on Sunday.
Both phones got good reviews for being easy to use and great for Web browsing. But in recent weeks, Google’s Android operating system for smartphones has grabbed the attention of the public, as Verizon Communications Inc. heavily promotes the Motorola Droid phone.
Track record: Palm chief and former head of Apple’s iPod unit Jon Rubinstein believes Palm doesn’t need to be as big as its rivals to thrive. Jim Wilson / NYT
While no one expected Palm’s sales would rival the sales of iPhones or BlackBerrys —and they have not—developers have not rushed to write applications for the phone as they have for the iPhone and Android phones.
A lack of traction could prove important. If the market will have room only for a few smartphone standards, Palm, as the smallest company, could well find itself struggling as the perpetual also-ran.
Jon Rubinstein, Palm’s chief executive who was the top Apple engineer and the first head of its iPod division, said in an interview that Palm does not need to be as big as its rivals to thrive. His former employer, after all, was long able to carve out a lucrative niche in the computer business.
“One of the key things we need to do as a company is to get to scale,” he said. “We need to bring on more carriers and more regions.”
Analysts expect that Palm will sell an upgraded version of the Pre with Verizon early next year and add AT&T later in the year. It sells phones in six countries and is steadily expanding to others in Europe and North America.
Investors trying to read the mood of the consumer are unsure whether Palm will prevail. The volatility in Palm’s stock is a sign of the uncertainty over its ability to challenge the iPhone and BlackBerry. Palm’s shares bounced up to $12.40 on Friday on speculation it would be acquired by Nokia, a prospect many analysts find unlikely.
Palm looks particularly small if smartphone applications are tallied. Apple’s App Store has at least 100,000 apps. No other phone operating system comes close, though there are about 10,000 apps for Android. Palm has about 300. “You develop for the iPhone first and for Android second, then for Palm or not,” said Philip Cusick, an analyst with Macquarie Securities. Cusick suggested that a large portion of phone buyers do not care about applications even though Apple has based the marketing campaign for its iPhone on selling the apps. “If applications become important, then Palm is going to have trouble,” he said.
Rubinstein said Palm would never need as many applications as the iPhone. “We are focused on quality over quantity,” he said.
Palm is still testing its app store, called the App Catalog, with a small group of developers. It will open to anyone who wants to write an app next month—six months after the Pre was introduced.
Rubenstein says he expects developers will write for Palm devices, in part because Palm’s operating system, called webOS, is based largely on the same languages used to design websites. Android, by contrast, is based on Sun’s Java language, and Apple uses a variation of the C computer programming language.
This year, Palm is hoping for a tactical advantage with the Pixi, which will sell for a lower price than most Android phones—$99 directly from Sprint and as low as $30 at Wal-Mart Stores Inc. That puts it in direct competition with other phones with keyboards such as RIM’s popular BlackBerry Curve. Verizon’s second Droid phone, the Eris made by HTC, also sells for $99, but it lacks a physical keyboard.
“We think the Pixi is in the sweet spot of the market now,” he said. “It was designed for people who are transitioning from feature phones and getting their first smartphone.”
©2009/The New York Times